Mr Krugman’s crude Keynesianism underplays the link between firms’ and households’ behaviour and their expectations of future tax and spending policy.

All through this debate, a recurring theme among anti-Keynesians has been that Keynesians like me or Brad are ignorant primitives who don’t know anything about modern macro. It’s really hard to see where that comes from, since I’ve done plenty of intertemporal optimizing in my time. Part of the problem seems to be that the people saying this are taken aback by what we’re saying because they don’t actually understand the implications of their own models.

But anyway, for the record: I understand the importance of expectations perfectly well — well enough to know that taking such expectations into account makes the case for stimulus stronger, not weaker.